CSX Corp. on Wednesday posted earnings that easily beat Wall Street expectations as its first quarter under the leadership of turnaround artist Hunter Harrison coincided with the continued recovery of coal shipments, a key product for freight lines.
Revenue for the three-month period ended in March rose 9.5% from a year before to $2.87 billion, fueled in part by a 3% rise in coal shipments, much of which was primed for export.
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The railway sector in general has been squeezed by slumping volumes for coal in recent years. CSX has been particularly vulnerable as it gets more of its revenue from coal than some peers.
The lone segment to retreat during the period was its Forest Products unit, which contracted 1%. Its intermodal business, or the moving of shipping containers, grew a modest 1%.
Wednesday marked the first earnings report for the recently installed Mr. Harrison, an industry maverick who is known for rejuvenating companies through cost-cutting and streamlining operations. The railway's market value has surged some $9 billion since the start of the year when it was first hinted he would be taking a leadership role.
Shares in the company, which have grown 78% over the past 12 months, rose 2.6% after hours to $48.15. In his first few weeks, Mr. Harrison, 72 years old, has held off on any sweeping comments regarding his overall plan.
He is scheduled to publicly address investors Thursday during an hour-long conference call. Investors are hoping to hear just how low Mr. Harrison thinks he can push CSX's operating ratio -- a key metric that measures costs as a percentage of revenue. Investors expect CSX to eventually reach a target percentage in the mid-60s. Last year, CSX logged an operating ratio of 69.4%.
With more than half a century in the industry, Mr. Harrison has turned around Illinois Central Railway, Canadian National Railway Co. and, most recently, Canadian Pacific Railway Ltd. by slashing labor costs and implementing tight controls on train schedules.
Mr. Harrison, who joined CSX last month, has already started to leave his mark on the company by doing away with hump yards, longtime fixtures of rail operators where long trains are broken down into individual cars.
The Jacksonville, Fla., company has already closed four humps in Georgia, Kentucky, Ohio and North Carolina. Mr. Harrison has said such facilities are inefficient because of the time-consuming way they work and high costs.
In all for the March period, CSX reported a profit of $362 million, or 39 cents a share, up from $356 million or 37 cents a year earlier. Excluding a restructuring charge of $173 million during the period, adjusted earnings were 51 cents.
Revenue climbed to 9.6% to $2.87 billion.
Analysts surveyed by Thomson Reuters expected earnings of 43 cents a share on revenue of $2.76 billion.
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(END) Dow Jones Newswires
April 19, 2017 18:01 ET (22:01 GMT)